10 Steps To Successful Strategic Sourcing

Former US Transportation Department CIO Nitin Pradhan outlines how agencies can execute strategic IT sourcing to minimize the total cost of ownership for optimal results.

Strategic sourcing gets a lot of lip service as a way to reduce the total cost of ownership (TCO) on IT investments and improve results, agility, and innovation. Many US public sector organizations -- including federal, state, and local governments, K-12 education, colleges and universities, and international development organizations -- plan to launch or have already launched strategic sourcing initiatives.

What's the best way to jumpstart an initiative? Try following these 10 steps:

1. Find out what you spend.In order to identify opportunities to save costs and improve efficiencies in public procurement, management first needs to know how much its organization is spending, on what, and by whom. In the public sector, unfortunately, spending data is often poorly organized, inappropriately classified, and exists in many different systems, so it's difficult to access and analyze.

The first step in addressing this "knowledge deficit" begins with automating data collection, cleansing, classifying, enriching, collating, and reporting spending data, preferably through cloud-based systems from industry innovators such as Spikes Cavell. That effort alone can significantly improve management's ability to identify millions of dollars of incremental value from its spending data.

2. Bulk purchase with similar-minded organizations.Cooperative bulk purchasing represents a big opportunity to lower TCO. Although large federal agencies may make bulk purchases on their own, state and local agencies may not. IT, procurement, and budget executives should team with similarly sized agencies across the nation to explore their tech buying patterns and identify opportunities for cooperative purchasing. Services such as Power Almanac can make it easy for governments to quickly identify and communicate with the right local government officials from 21,000 municipalities, townships, and counties across the US.

3. Use commercial software.The public sector technology procurement process favors custom-built solutions, which are costly to develop, time-consuming to test, difficult to maintain, and expensive to upgrade. When strategic sourcing initiatives do turn to commercial off-the-shelf (COTS) products, they tend to focus on commodity IT, such as laptops and desktops.

Using commercial systems to manage missions (such as transit or safety systems) or mission-support systems (such as administering grants and procurement) can save money. I've seen it first-hand since leaving the Transportation Department, with no-cost services such as GOVonomy, which I helped create. This service helps identify innovative COTS solutions for government. The advantage of COTS over internally developed systems lies in the ability of COTS products to distribute the cost of development, testing, maintenance, and upgrades over a large number of customers, thereby allowing the public sector to save millions in costs.

Product Lifecycle Management graphic (Source: Wikimedia Commons)

4. Simplify RFPs: Provide a statement of objectives.A statement of objectives (SOO) expresses the basic, top-level objectives of the delivery order and is provided in the request for proposal (RFP) in lieu of a government-written statement of work (SOW). This approach reduces the inherent instructions to bidders regarding "how to" accomplish the procurement work typically found in the SOW, and instead encourages cost-efficient creativity.

5. Give bidders a budget.Informing bidders of your budget is always a good idea. This eliminates solutions that are too expensive or too basic and reduces non-competitive bids.

6. Remove unnecessary restrictions to RFP review.In my experience, many state and local governments require registration and sometimes even charge a fee simply to review RFPs. Although they make a few dollars, and weed out all but the most serious contenders, they might be losing access to better solutions by scaring away first-time bidders. Easier

Nitin Pradhan is a former CIO of the US Department of Transportation and the Managing Partner of GOVonomy, a no-cost strategic technology sourcing initiative for the US public sectorthat identifies, assesses, and introduces innovative technology products and productized ... View Full Bio

For folks who are interested in Spend Analitics topic mentioend in this article, there is a good webinar Public Technology Institute has arranged in partnership with GOVonomy and Spikes Cavell on May 29 at 2pm. Any one can register at: http://www.pti.org/index.php/t1/more/211.